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Ex-Bundesbank Chief Says Greece Will Never Repay Debt, Says Bailout All About "Rescuing Banks And Rich Greeks"

Tyler Durden's picture




 

Finally someone speaks the truth. In an interview with Spiegel Magazine, former Bundesbank chief Karl Otto Pohl, says it how it is: "Without a "haircut," a partial debt waiver, [Greece] cannot and will not ever [repay its debt]. So why not immediately? That would have been one alternative.
The European Union should have declared half a year ago -- or even
earlier -- that Greek debt needed restructuring." As for the reason for the bailout, Pohl's observation will not be a surprise to our readers "It was about protecting German banks, but especially the French banks, from debt write offs." Is there any hope for Europe now? It appears no, as the right decision was to let Greece go bankrupt: "Investors would quickly have seen that Greece could get a handle on its
debt problems. And for that reason, trust would quickly have been
restored. But that moment has passed. Now we have this mess." Amusingly, when asked if banks used "speculators" as a straw man to break all EU Rules and especially the Lisbon treaty:"Of course that's possible. In fact, it's even plausible." We can't wait until the German population realizes just how massively it has been scammed. Last week's Nordrhein-Westphalia Merkel loss will seem like a walk in the park once the mobilized German society decides to fix things on its own.  Oh, and look for the EU and the euro to be a thing of the past.

Key items from the Spiegel interview:

SPIEGEL: The German government has said that there was no
alternative to the rescue package for Greece, nor to that for other
debt-laden countries.

Pöhl: I don't believe that. Of course there were alternatives.
For instance, never having allowed Greece to become part of the euro
zone in the first place.

SPIEGEL: That may be true. But that was a mistake made years ago.

Pöhl: All the same, it was a mistake. That much is completely
clear. I would also have expected the (European) Commission and the ECB
to intervene far earlier. They must have realized that a small, indeed
a tiny, country like Greece, one with no industrial base, would never
be in a position to pay back €300 billion worth of debt.

SPIEGEL: According to the rescue plan, it's actually €350 billion ...

Pöhl: ... which that country has even less chance of paying
back. Without a "haircut," a partial debt waiver, it cannot and will
not ever happen. So why not immediately? That would have been one
alternative. The European Union should have declared half a year ago --
or even earlier -- that Greek debt needed restructuring.

SPIEGEL: But according to Chancellor Angela Merkel, that would
have led to a domino effect, with repercussions for other European
states facing debt crises of their own.

Pöhl: I do not believe that. I think it was about something altogether different.

SPIEGEL: Such as?

Pöhl: It was about protecting German banks, but especially the
French banks, from debt write offs. On the day that the rescue package
was agreed on, shares of French banks rose by up to 24 percent. Looking
at that, you can see what this was really about -- namely, rescuing the
banks and the rich Greeks.

SPIEGEL: In the current crisis situation, and with all the
turbulence in the markets, has there really been any opportunity to
share the costs of the rescue plan with creditors?

Pöhl: I believe so. They could have slashed the debts by
one-third. The banks would then have had to write off a third of their
securities.

SPIEGEL: There was fear that investors would not have touched
Greek government bonds for years, nor would they have touched the bonds
of any other southern European countries.

Pöhl: I believe the opposite would have happened. Investors
would quickly have seen that Greece could get a handle on its debt
problems. And for that reason, trust would quickly have been restored.
But that moment has passed. Now we have this mess.

SPIEGEL: How is it possible that the foundation of the euro was abandoned, essentially overnight?

Pöhl: It did indeed happen with the stroke of a pen -- in the
German parliament as well. Everyone was busy complaining about
speculators and all of a sudden, anything seems possible.

SPIEGEL: You don't believe in the oft-mentioned attacks allegedly perpetrated by currency gamblers, fortune hunters and speculators?

Pöhl: No. A lot of those involved are completely honorable
institutes -- such as banks, but also insurance companies and
investment- and pension funds -- which are simply taking advantage of
the situation. That's totally obvious. That's what the market is there
for.

...

SPIEGEL: With the exception that speculators are now carrying no
risk at all because euro-zone members have agreed to guarantee Greek
debt.

Pöhl: Yes, and that is harmful. It means that the basic balancing mechanism in the market economy is out of sync.

SPIEGEL: Is it possible that politicians invented the specter of
rampant speculation to legitimize a break with the Lisbon Treaty and
with the ECB's rules?

Pöhl: Of course that's possible. In fact, it's even plausible.

SPIEGEL: What will be the political consequences of this crisis?

Pöhl: The whole mechanism of the European community will change.
The EU is a federation of nations, not a federal republic. But now the
European Commission will have a lot more power and more authority as
well as the potential to interfere in national budget law. That,
however, is constitutionally problematic in Germany.

SPIEGEL: But this could also be construed as a positive
development. For a long time, critics have been saying that before we
can have a genuine currency union we need common fiscal and economic
policy. Surely this crisis has brought the EU closer to that goal.

Pöhl: Yes, that is the logical next step of our union, but we
must bear the burden. You only have to look at what it is going to cost
us Germans. I would have preferred that things hadn't gone quite this
far.

...

SPIEGEL: If you were president of the Bundesbank today, would
you be ordering the printing of German marks just in case they became
necessary?

Pöhl: No, no, we have not gone that far quite yet. In my
opinion, the euro is in no danger. Perhaps one of the smaller countries
will have to leave the currency union.

SPIEGEL: How should that work?

Pöhl: It would involve Greece, if we stick with the case we were discussing, reintroducing the drachma.

SPIEGEL: But Greece doesn't seem to have any interest in doing
that -- and it would be against European agreements to force Athens to
leave the currency union.

Pöhl: That is correct. As long as a country receives such
massive support, it would, of course, have no interest in turning its
back on the euro.

SPIEGEL: You think that could change?

Pöhl: On the mid and long term, I wouldn't rule it out.

 

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Tue, 05/18/2010 - 12:15 | 358281 buzzsaw99
buzzsaw99's picture

Headline = No shit Sherlock.

Tue, 05/18/2010 - 12:17 | 358283 Citizen of an I...
Citizen of an IKEA World's picture

Rescuing "banks and rich Greeks?"  Well, I don't know about the latter, but as to the former--in the long run--EPIC FAIL.

Tue, 05/18/2010 - 12:17 | 358286 Hondo
Hondo's picture

I believe this totally

Tue, 05/18/2010 - 12:20 | 358290 ZackAttack
ZackAttack's picture

I never assumed it was anything else.  

For the last two years, in order to predict what will happen, all you've had to do is ask "What would most benefit the mega-banks?"

Tue, 05/18/2010 - 12:37 | 358345 SWRichmond
SWRichmond's picture

This is the principal reason I'm in the "printing money" camp.  It is less destructive to the banks than would be a general and self-reinforcing deflation.

Tue, 05/18/2010 - 12:55 | 358405 pan-the-ist
pan-the-ist's picture

The next step seems to be the wealthy class (elites) flight to gold and other depression resistant assets before the ship sinks.  I'd try to buy a seat on a life boat if I had the money.

Tue, 05/18/2010 - 13:40 | 358514 weinerdog43
weinerdog43's picture

"...if I had the money."

But you do!  Even buying a Silver Eagle a week helps both your lifeboat as well as helps hasten the inevitable.  Payday for me is Thursday, and I'm going to pop over and get about $50 worth of junk silver.  The author mentions that the Germans will eventually get pissed off enough to do something.  Wait till that day hits the US with millions of pissed off, unemployed, armed Americans running around. 

Tue, 05/18/2010 - 12:26 | 358301 ratava
ratava's picture

You can either fight the speculators or use them. If there was a decisive action along the lines of "Greece violated the rules and has to pay." sometime in late March/early April, there was an army of Europeans willing to jump on the long Eur wagon on what they have seen as a buying opportunity caused by media bubble. Now that we blew through both 2009 and 2008 bottoms, I would rather chop my arm of than go long and watch the idiots at the wheel make another selfish non decision that will cost me money. The Euro is headed to parity and the Eurocrat cowards only have themselves to blame.

Tue, 05/18/2010 - 12:25 | 358305 Quantum Noise
Quantum Noise's picture

It is quite amusing to see these bankers develop both the ability to tell the truth and the ability to understand basic arithmetic AFTER they retire... so well done, Herr Pohl.

Tue, 05/18/2010 - 12:28 | 358315 chindit13
chindit13's picture

There is a fascinating ideological change taking place in the world today, as Asia gears up to lead the world and the West to fall into a kind of coolie state to the new converts to capitalism.  At a time when the Western world is saying that efficient allocation of capital is wrong, and bailing out the well connected at the expense of the masses is the way to run a society, China is taking its once richest comrade and tossing him in jail for 14 years for corruption.

The West bails out losers and criminals;  the East now jails criminals.

In the long run, who looks as if they are running a more successful strategy?

Us treaded-on serfs of the West have two choices:  accept our lot as coolies to the new capitalists, or overthrow---by violent means if necessary---the elite who oppress us and condemn us to slavery.  We have little left to lose.

Off with their heads!

Tue, 05/18/2010 - 13:15 | 358458 Steaming_Wookie_Doo
Steaming_Wookie_Doo's picture

Is there a black van parked outside your house yet?

Is it just me, or are the rest of you waiting for the last act of Fight Club to be played out? My bet's on Sept-Oct timeframe.

Tue, 05/18/2010 - 12:27 | 358316 Kataphraktos
Kataphraktos's picture

http://fimotro.blogspot.com/2010/05/40_18.html

Translation: Greek losses due to tax evasion amount to 40% of GDP.

Forty. Percent. Of. GDP.

Tue, 05/18/2010 - 12:28 | 358317 doomandbloom
doomandbloom's picture

is this really news for us here on ZH?

Tue, 05/18/2010 - 12:44 | 358363 Al Huxley
Al Huxley's picture

The news is the public admission by a former senior official in a prominent German magazine.  Social unrest, coming soon.

Tue, 05/18/2010 - 12:31 | 358327 exportbank
exportbank's picture

The Germans may allow the rescuing of a German bank but the next opportunity they get to vote they'll show the door to Merkel for falling for this scam to rescue French and Greek banks.

Tue, 05/18/2010 - 12:32 | 358332 bugs_
bugs_'s picture

rich greeks.

Tue, 05/18/2010 - 12:35 | 358342 snowball777
snowball777's picture

OT: An interesting talk (by a probable Marxist) with some interesting perspectives on the finance, sov debt, etc crises...

http://www.youtube.com/watch?v=26o22Y33h9s

Tue, 05/18/2010 - 12:38 | 358351 Brokenarrow
Brokenarrow's picture

This is how wars start.

Tue, 05/18/2010 - 12:46 | 358370 LeBalance
LeBalance's picture

its.....massive distraction time.  Time for a "Tim Osman" clone to "fill-in your false flag wet dream."

Tue, 05/18/2010 - 12:52 | 358390 snowball777
snowball777's picture

A nice cover of a classic...

http://www.youtube.com/watch?v=fS2KQS5yU-o

Tue, 05/18/2010 - 13:08 | 358433 economicmorphine
economicmorphine's picture

Why is Pohl picking on Greece?  Portugal, Spain, Italy, Ireland and the Baltics aren't going to ever pay their debt back either. Neither are France the UK, Japan or the United States.  Oh how I wish someone on the world stage had the cojones to actually say what everyone already knows.

Tue, 05/18/2010 - 13:09 | 358437 Portugal
Portugal's picture

This is not news. Its copied from last week, that was copied from the week before.  

Tue, 05/18/2010 - 13:10 | 358440 M.B. Drapier
M.B. Drapier's picture

Quick, name a European bank that's up to its eyeballs in exposure to Greece. Now name one such bank that's been increasing its exposure to Greece in the past few weeks.

Tue, 05/18/2010 - 13:15 | 358456 DaveyJones
DaveyJones's picture

"Bailout All About "Rescuing Banks And Rich"

where have I heard this before? The only fitting phrase for the group is "bail" 

Tue, 05/18/2010 - 13:38 | 358509 Captain Obviousness
Captain Obviousness's picture

I've been pounding this into the head of anyone who will listen.  Don't call it a bailout of Greece.  It is a bailout of the banks and funds that own Greek debt.  All of these bailouts are ultimately about funneling taxpayer money to banks.  It's so simple and so obvious, but everyone gets bogged down in talk of "contagion" and "global instability."  Fucking banksters, the world will not collapse if you get the shaft.

Tue, 05/18/2010 - 13:41 | 358519 junkyard dog
junkyard dog's picture

Banks, we talk about Greek banks as though they are important in Greece. What is important in Greece is shipping.

The sea, the tourist and shipping. A vacation paradise; they do not need the Euro, and the Euro does not them. They have been around longer than most, and will be for eternity. The Greeks are following a game plan that works; one where they do not have to work, until 2 days before they die, like in this country. Everything was going to plan until some American backed crooks stole the bank's money. Now the Greek banks  want it back just like our banks wanted it back and got it. However, if the Greek banks are going to cause a change, to get this money, in a 4,700 year old plan that works, the tourist will be sightseeing while walking through blood and destruction.

 

Tue, 05/18/2010 - 13:52 | 358560 dmeier
dmeier's picture

I think officials around the world are using Richard Koo's playbook. When faced with a systemic banking crisis and weak demand for funds, non-performing loans and investments must be written off slowly and capital must be injected into the system.

Tue, 05/18/2010 - 13:57 | 358581 Bruce Krasting
Bruce Krasting's picture

Pohl is highly respected in Germany. This is a big deal.

Tue, 05/18/2010 - 14:05 | 358614 AllYourBaseAreB...
AllYourBaseAreBelongToUs's picture

Looking forward to being a millionaire!

 

(Oh wait, everyone else will be too?)

 

:(

Tue, 05/18/2010 - 15:39 | 358928 BlackBeard
BlackBeard's picture

Junior high kids have more commonsense than these conflicted politicos.

Tue, 05/18/2010 - 15:45 | 358941 Reductio ad Absurdum
Reductio ad Absurdum's picture

It is disingenuous to "cherry pick" from Poehl's statements:

TD: Look for the EU and the euro to be a thing of the past.

Poehl: In my opinion, the euro is in no danger.


(Either Poehl is smart and you have to consider everything that he says as being plausible, or Poehl is dumb and you can disregard everything that he says. But don't just pick the ideas that you already believe and ignore the rest.)

Tue, 05/18/2010 - 18:57 | 359307 Celsius
Celsius's picture

The BundesWehr will take back what the Germans have lost... It's the Casus Belli to let the Panzers loose through southern Europe. The German's tried it the peaceful way via the financial markets for 65 years. Now, they will pick up the sword! In the name of order and stability for the European Empire they will march. The PIGS will fall to France (Portugal and Spain) and Germany (Italy and Greece) in a matter of days. The Franco-German EURO empire will begin. Europe has been waiting for the rise of a new Roman Empire!

Wed, 05/19/2010 - 00:20 | 359979 Dr. Goose
Dr. Goose's picture

Says Herr Pöhl, ex-Bundesbank president, 

"This bailout's akin to embezzlement

Greek tycoons and French banks 

Owe my countrymen thanks 

For this really regrettable precedent."

 

http://www.limericksecon.com

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